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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The change in quantity demanded resulting from a change in the price of one good relative to other goods






2. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






3. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






4. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






5. The most desirable alternative given up as the result of a decision






6. The additional benefit received from the consumption of the next unit of a good or service






7. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






8. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






9. Models where firms agree to mutually improve their situation






10. Ei = (%dQd good X)/(%d Income)






11. Exists if a producer can produce more of a good than all other producers






12. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






13. The ability to set the price above the perfectly competitive level






14. Ed = (%dQd)/(%dP). Ignore negative sign






15. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






16. All firms maximize profit by producing where MR = MC






17. AVC = TVC/Q






18. A good for which higher income decreases demand






19. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






20. The additional cost incurred from the consumption of the next unit of a good or a service






21. The lost net benefit to society caused by a movement away from the competitive market equilibrium






22. Ed = 0 - no response to price change






23. The practice of selling essentially the same good to different groups of consumers at different prices






24. The sum of consumer surplus and producer surplus






25. Models where firms are competitive rivals seeking to gain at the expense of their rivals






26. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






27. The mechanism for combining production resources - with existing technology - into finished goods and services






28. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






29. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






30. Total product divided by labor employed. APL = TPL/L






31. When firms focus their resources on production of goods for which they have comparative advantage






32. Entry (or exit) of firms does not shift the cost curves of firms in the industry






33. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






34. The difference between total revenue and total explicit costs






35. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






36. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






37. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






38. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






39. The price of a good measured in units of currency






40. The imbalance between limited productive resources and unlimited human wants






41. Ed > 1 - meaning consumers are price sensitive






42. Costs that change with the level of output. If output is zero - so are TVCs.






43. Ed < 1






44. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






45. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






46. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






47. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






48. Product demand - productivity - prices of other resources - and complementary resources






49. Ei > 1






50. AFC = TFC/Q